Banks record N49.4tn online transactions, cheque payments shrink

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Banking

Monday, October 14,2019

Increase in alternative digital payment platforms has reduced the number of visits to banking halls as indicated by the reduced number of payments made by cheques in the first half of the year. IFE OGUNFUWA examines the issue

The volume of cheques cleared by Nigerian banks keeps shrinking as banks and financial technology companies continue to introduce faster and easier means of making payments.

This is as the use of online financial transaction platforms has continued to rise with volume of payments on Nigerian Inter-Bank Settlement Scheme Instant Pay growing by 63.5 per cent to 504.16 million in the first six months of this year compared to a total of 308.41 million in the corresponding period in 2018.

Data obtained from the NIBSS indicated that the value of NIP transactions hit N49.35tn in the first six months of the year, recording 33.8 per cent growth as against a total of N36.49tn from January to June in 2018.

NIP is an online payment platform that can be accessed on mobile and web and regarded as the most preferred payment platform.

From January to June this year, the volume of cheques cleared by Nigerian banks dropped by 16.7 per cent to 3.95 million compared with 4.74 million recorded in the industry within the corresponding period in 2018, statistics obtained from the NIBSS showed.

Also, the value of cash transactions via cheques suffered a decline of 11.37 per cent from N2.6tn in the first six months of 2018 to N2.3tn between January and June this year.

Cheques are documents that instruct banks to pay a certain amount of money from one person’s account to another or to be withdrawn as cash.

Transactions via cheques have been on a steady decline this year as shown by data on the volume of cheques cleared from January to June.

Information from the NIBSS showed that in January 2019, banks honoured 712,191 cheques valued at N403.22bn as against, 885,166 cheques valued at N449.25bn in 2018.

A further analysis indicated that in February 2019, a total of 640,497 cheques worth N372.36bn were cleared as against 784,659 cheques worth N426.91bn in 2018.

Industry data showed that in March 2019, 653,032 cheques worth N377.17bn were cashed out compared to 806,284 cheques worth N440.73bn in 2018.

Similarly in April this year, fewer numbers of cheques – 638,248 – worth N379.82bn were cashed out as against 737,353 cheques worth N435bn in 2018.

May 2019 saw 718,139 cheques valued at N401.76bn cleared by banks, a volume lower than 798,737 cheques valued at N446.44bn in 2018.

In June this year, bank customers presented 591,741 cheques valued at N336.59bn for clearance as against 732,157 cheques valued at N397.62bn in 2018.

Experts note that this is an indication of a reduction in the number of visits by customers to the banking halls for withdrawals and a rise in the adoption of electronic payments for financial transactions.

They also attributed the trend to the growing dominance of financial technology and the adoption of innovation in digital payments by traditional banks.

The NIBBS statistics indicated that the use of digital financial transaction platforms continued to rise as the volume of Point of Sales, mobile payments and electronic bill payments recorded double-digit growth.

An analysis of the NIBSS data indicated that the volume of electronic payment of bills such as utility bills, cable TV subscription, hotel and airline bookings, school fees and airtime top-up grew by 20.1 per cent to reach 616,651 from January to June this year from 513,442 in the corresponding period in 2018.

The data showed that the value of e-bills transactions rose by 9.7 per cent from a total of N256.65bn in the first six months of 2018 to N281.56bn in the corresponding period in 2019.

In addition, industry statistics showed that the volume of transactions on the PoS terminals across the country rose to 187.7 million in the first six months of this year from 120.79 million in the first six months of 2018, representing a 55.39 per cent growth.

Also, the value of deals carried out on the PoS terminals recorded double-digit growth, 35.87 per cent, as financial payments grossed N1.38tn in the first six months of the year compared to N1.02bn deals carried out in the corresponding period of 2017.

As the drive to reach 80 per cent financial inclusion target by 2020 given by the Central Banks of Nigeria intensifies, more PoS terminals are being issued for super agent banks to extend the reach of financial services to remote areas where banking services are not available.

According to the NIBSS data, 270,11 PoS terminals had been registered as of March this year.

Industry data revealed that there were 121 million banks accounts as of March 2019, with 40 per cent of them being inactive.

Speaking on the changing trend of financial services delivery in the country, the Executive Director, Inlaks, Tope Dare, said the financial technology companies would continue to compete with the traditional banks and disrupt the industry.

He noted that the impact of digitalisation was more intense in the financial services industry and banks had increased their investment in technology to automate their processes in response to customers’ demand.

“It is very certain that disruption in the banking sector will continue. Fintechs are competing with the banks for the same customers. Banks that can transform into truly effective digital banks will not only survive the threats but be relevant, going forward,” he added.

The Managing Director, Upperlink Limited, Mr Segun Akano, noted that banking operations had gone beyond brick mortar with customers preferring online transactions.

According to him, banks have been able to reduce investment in establishing branches and have started spending more on technology that will facilitate online transactions.

“Banking operations are going beyond the physical structures to online; and to offer efficient services online, they need to invest in software that will make it easy for customers to use,” Akano said.

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